Leslie Moonves turned CBS into the country’s No. 1 network and revolutionized the way broadcasters get paid for content. Why he believes the future of TV is still bright


The Hit Maker


Leslie Moonves turned CBS into the country’s No. 1 network and revolutionized the way broadcasters get paid for content. Why he believes the future of TV is still bright.


“The guy relaxes by working,” says superagent Ari Emanuel of Moonves.

There’s no business like show business, as the Irving Berlin song goes. Trouble is, too few in the trade understand the business as well as the show. Leslie Moonves, who has run CBS since its spinoff from Viacom in early 2006, is a notable exception, having restored the so-called Tiffany network to glory and profits with programming hits and savvy deal-making. Today, CBS is No. 1 among television networks, and a strong fall lineup of new shows, including The Crazy Ones with Robin Williams, seems likely to secure its coveted status.

CBS (ticker: CBS) was running third behind NBC and ABC when Moonves joined the network’s entertainment division in 1995 after 10 years in executive roles at Lorimar and Warner Brothers Television. Not only had CBS’ audience aged, but staff morale had sunk as low as the ratings. After finding the network’s Hollywood offices deserted one Friday afternoon during his first summer on the job, he famously fired off an angry memo to employees. The ominous message: “If you’re not working on Friday afternoon, don’t bother coming in on Monday.”

That attitude typifies Moonves’ take-no-prisoners approach, especially with those he believes aren’t giving CBS its due. Take, for example, this summer’s battle royal with Time Warner Cable (TWC) over retransmission fees that the cable company pays CBS to carry its programming in major markets including New York, Los Angeles, and Dallas. CBS refused to trim its demands for higher retransmission fees and greater rights to its digital content, even after Time Warner Cable booted its programming off the air in a first-ever blackout, which lasted a month. The cable company eventually backed down as viewers went elsewhere, and reportedly agreed to pay CBS $2 per subscriber, double its prior fee.

“CBS spends lots of money on sports rights and the production of top-quality programming, and we need to get paid appropriately for it,” Moonves says.

In typical fashion, CBS was setting the standard for the rest of the broadcasting world. It was Moonves, after all, who led the seemingly quixotic but ultimately successful charge in 2007 to have cable operators pay subscription fees to broadcasters in the first place. With the growth of new technologies like digital video recording and video on demand, as well as Internet TV and mobile viewership, CBS’ boss recognized that broadcasters would need to find alternative sources of revenue to advertising, which had been the standard in the television industry for the past 60 years.

Retransmission fees brought in more than $250 million of CBS’ $14 billion in revenue last year; they are expected to quadruple by 2017. Rather than shrink from the challenge of new media, Moonves has embraced it, reaching deals to license a small part of CBS’ extensive library of top-quality shows to Internet-streaming services such as Netflix(NFLX) and Hulu. Moonves is sanguine as well about the entry of new media players into the arena, because CBS is one of the undisputed leaders in creating stories that millions of people want to watch.

“We used to get one or two revenue streams for our content, and now there are 10 or 12 new platforms,” he says. “We are getting paid for content in so many different ways. We are not a dying thing, but a shifting industry.”

CBS’ ENTERTAINMENT PORTFOLIO is anchored by the broadcast network, and also includes cable networks such as Showtime, local television stations, and the book publisher Simon & Schuster.

Under Moonves, results have dazzled. Earnings-per-share growth has averaged 72% a year over the past three years on revenue gains of just 3%, as CBS has squeezed more dollars out of its content. Analysts are forecasting a 21% increase in earnings this year, to $1.9 billion, or $3.09 a share, on an 8% jump in revenue, to $15 billion. The company could earn $3.49 a share in 2014, driven by gains in retransmission fees, worldwide licensing of content, and share buybacks. Over the last two years, CBS has reduced its shares outstanding by 16.5%.

CBS’ stellar operating performance has translated into a winning story for investors. Since the network’s split from Viacom, which owned it for seven years, CBS’ shares have trounced the market, returning 188%, dividends included. That compares with a total return of 61% for the Standard & Poor’s 500. Shares hit an all-time high on Friday, finishing at $59.20. They yield 0.8%.

Behind the company’s success is Moonves’ celebrated eye and uncanny knack for picking stories and actors with broad appeal. Not long after joining the company, Moonves put the sitcom Everybody Loves Raymond on the Friday night schedule, where it floundered. Although the CBS schedulers told him to cancel the show, “he knew in his heart that it was a great show, and he was going to nurture it until the audience caught up to it,” says Lou Briskman, the company’s longtime general counsel. When Raymond moved to Monday night, it became a breakout hit.

“When you combine an artist’s heart with a business brain, you get a remarkable executive,” says actor Ted Danson, who stars in CSI, a CBS procedural drama that Moonves likewise championed against the advice of his brain trust, and that became a long-running network hit.

Jon Voight, the Academy Award–winning actor who plays the father of the title character in Showtime’s Ray Donovan, similarly heaps on the praise, likening Moonves “to the great moguls, in the best sense of the word—the people who built our business.”

Robert Daly, the onetime head of Warner Brothers and Moonves’ mentor and former boss, calls the CBS chief “by far the best executive, including me, I’ve ever come across in the creative business of running a television company.” In his eyes, Moonves is a rightful successor to the legendary William Paley, founder of the Columbia Broadcasting System.

Moonves, a boyish-looking 64, is paid lavishly to impress, although his 2012 compensation of $62 million in cash and stock can’t begin to approach the $575 million that Michael Eisner once pulled down in a single year as head of Walt Disney (DIS). Moonves’ pay is a sore point for some CBS investors, but last year’s haul was 11% lower than the previous year’s, and $27.5 million of it was a bonus Moonves received for hitting performance goals. Noting that compensation is the board’s decision, Moonves says, “Clearly, they think I’m of value to the company and our shareholders.”

MOONVES GREW UP on Long Island, where his father owned several gas stations. His love of the performing arts comes from his mother, “a culture vulture who would take me into New York to see the theater,” he says.

After graduating from Bucknell University with a degree in Spanish, Moonves spent several years studying acting at the Neighborhood Playhouse in New York. “I loved the creative process, but I also had a natural curiosity about the business,” he says.

As a result, he spent a lot of downtime hanging around the set observing people and figuring out how things work. He quickly recognized that acting wasn’t the steadiest or most lucrative line of work, especially in the theater, and redirected his ambition to the television industry.

Moonves was hired in 1980 to work in the development department at Columbia Television. By then, he was in his early 30s, competing against peers with an eight-year start. Undaunted, he learned the business by talking to everyone he met. “People like telling you what they do, and I wanted to hear their stories,” he says.

Moonves’ fascination with people has been critical to his success and that of CBS. It has helped him to hire and retain a cadre of loyal executives, but even more important, give audiences what they want. “He has a great sense of what works—what people like to see that’s entertaining,” says LL Cool J, the rapper who stars in the CBS crime drama NCIS: Los Angeles.

The CEO’s fabled instincts also include “an uncanny ability to know which actors to cast,” says Jerry Bruckheimer, the producer who developed the CSI franchise. For example, Moonves stuck with an unknown actor named George Clooney through several flops before casting him in his breakout role in the hospital drama ER.

Moonves personally selected a young New York reporter, Julie Chen, in 1999, after viewing a score of tapes, to work on a new early-morning show. Some might argue it was his best pick; five years later, they were married.

Moonves and Chen, now host of the reality show Big Brother, have a young son, and Moonves has three grown children from a previous marriage. He spends most of his time in L.A., where CBS Entertainment is based and where his family lives, and the rest in New York, home to the company’s corporate offices.

LIKE ANOTHER MENTOR, Sumner Redstone, chairman of CBS and Viacom, Moonves believes content is king, and its dissemination via various media platforms will be critical to the company’s future. Earlier this year, CBS reached a four-way deal to syndicate The Good Wife to Amazon, Hulu, the Hallmark Channel, and station groups. Ultimately, he envisions that alliances like these will reduce CBS’ reliance on advertising to about 50% of revenue from the high 60s just a few years ago. And while he doesn’t know what the next big thing will be, he says the unifying theme is that “they all need our content.”

To be sure, some upstarts, like Barry Diller’s Aereo, are nibbling at broadcasters’ revenues by streaming local television signals over the Web without their permission. Moonves dismisses the threat, saying that Aereo “has gotten way more attention than it deserves,” and that even in New York, it still has only a couple of thousand subscribers. At the same time, CBS just joined with a number of other entertainment companies to ask the U.S. Supreme Court to review a lower-court decision that Aereo, a fee-based service, didn’t violate their copyrights.

Moonves takes pride in surrounding himself with a strong team of creative and business executives, and feels confident that “if you establish a culture, there’ll be somebody who takes over for me who has a different set of abilities and who will lead in a different way.” He and others say he has fostered an environment where his subordinates feel comfortable enough to open up about their disagreements. “They are very spirited discussions, and I like that,” he says. “I don’t think any of my key people are afraid to say anything to me.”

If the young Turks are anything like the boss, they’ll believe that one day they can outdo him. As a young executive, Moonves sized up his chances for success after his first staff meeting at one of his early jobs. Watching the person who hired him in action, he said to himself, “If this is one of the best guys in television, I’m going all the way.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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